Even With New Fees, Most Checking Accounts Beat Prepaid Debit Cards

Pushers of prepaid debit cards say the fees they charge are comparable to a checking account, but a new study by Consumers Union, publishers of Consumer Reports and this blog, finds that by and large, checking accounts are still a better deal.

“Assuming consumers took no steps to avoid fees, all of the banks and credit unions we examined were cheaper than nine of the twelve prepaid cards,” said Consumers Union on DefendYourDollars.org. And, “even if checking account customers pay a monthly fee, they are better off in most cases than many of the prepaid card customers who take all of the steps they can to avoid fees.”

Regular checking account users can avoid fees by making sure to only use ATMs in their network and by abiding any minimum balance, monthly activity or direct deposit requirements. Prepaid users can avoid fees by also not using non-network ATMs for withdrawals and balance inquiries, and by only reloading their cards via direct deposit.

Once again, members of the “second tier” banking system get the shaft. “Just don’t do the stuff that incurs a fee!” you might tell prepaid debit card users. If only it were so simple. The study also observed that “the complete fee schedule was difficult to find on company web sites and the information was sometimes confusing.”

Prepaid Cards vs Bank Account [DefendYourDollars]
Adding It All Up: How Prepaid Card Fees Compare to Checking Account Fees (PDF) [Consumers Union]